If your consultant tells you one-and-a-half to two times production in accounts receivable is OK ... get a new consultant.
Robert E. Hamric, DMD
Many practices today have become "mini-banks" for patients. Doctors loan their patients money, interest-free, every day. Whenever a patient walks out of your office, owes you money, and says, "Send me a statement," you have loaned money. Oftentimes, the business assistant doesn`t ask for payments, has not made financial arrangements, or volunteers to send a statement. Is it any wonder the real business world thinks dentists are just poor businesspeople?
I`m amazed how many practices survive the cash-flow crunch, regardless of what they have in accounts receivable. Usually, everybody gets paid except the doctor, who takes the hit when cash flow drops. I have audited practices with as much as $1 million or more in accounts receivable. That`s not a mini-bank ... that`s a real bank! Most consultants coach that an amount of one-and-a-half to two times monthly production is a healthy figure to maintain. They say if you gross $50,000 per month, you could have $75,000 - $100,000 on the books, and still be financially "healthy." That`s baloney!
If your consultant tells you that one-and-a-half to two times production in accounts receivable is OK ... get a new consultant! The only money that should be on your books is what is outstanding in insurance. That`s all - no debate! Your business assistant must be good enough to know what the patient`s portion of an insurance claim will be and collect that money in advance.
The latest great event in dentistry is for a few "experts" (who don`t practice) to bash insurance, encourage practitioners to stop accepting insurance, and become insurance-free. I know several dentists who are doing this and who have survived; however, they had a different blend of patients to begin with. Only a few dentists will be able to pull that off. The vast majority will not give up insurance, because they cannot possibly survive that way. It`s easier to eliminate accounts receivable than to go insurance-free!
I personally believe it is more of a practice-builder to take assignment of insurance and allow the patient to pay any difference. Note that I said "pay" - not "loan!" You must choose what insurance companies in your area are best for you. There are some types of insurance that are not going to provide any profit for your practice. Determine your chairtime and production goals and know your time-allotment scale on each procedure to see if you can be a provider and still make a profit. Insurance is not going away. To limit your practice is a major risk. Choose your plans carefully.
Good financial arrangements begin long before case presentation. As I learned at Walter Hailey`s Dental Boot Kamp, there are several important steps to follow before you ask for money. Every step is important. What you want to achieve is rapport and trust before presenting the case and the fee involved. Take a look at our step-by-step procedure in Figure 1.
Each step is a chapter of its own. Each step helps develop rapport and trust when handled properly. The patient`s first impressions of the staff, office, and doctor are very critical.
One of the best ways to develop rapport is to ask questions and listen. Most dentists (and staff) want to begin teaching and preaching before they understand the patient and his or her "felt needs." Find someone or something you have in common with the patient and talk about that. Be yourself, be informal, and be interested in the other person. A conference room is one of the most important areas of the office. All new patients begin in the conference room, and all case presentations are done in the conference room - not the operatory or the hallway or the doctor`s private office or the front desk. This is part of building rapport. Patients don`t care how much you know until they know how much you care.
People buy what they want, not necessarily what they need. It is our responsibility to help them understand what they need. Most people in this country are able to buy whatever they want. Go to Circuit City and watch the 60-inch entertainment centers sell; go to a marina and price a fishing boat; look at the cars your patients drive.
Most people don`t want to spend their money on dentistry. In 30 years of practice, I never had a patient say to me, "Hey, Doc, I`ve got an extra $10,000, and I want to spend it with you."
One staff person must be fully responsible for discussing finances. This person should be properly trained to keep zero accounts receivable. This is a special personality who will find a way to finance the needed dentistry for the patient. The doctor does not need to discuss money.
Grossing a million is done every year. That`s $83,333 per month, or $5,000 per day for a 200-day work year. Sending no statements is a bit harder! It takes good verbal skills and a true way for the patient to fit payments into his or her budget.
We teach patients how to treat us. Sometimes they cancel appointments, don`t show for appointments, or walk up to the front desk and say, "Just bill me." These are the times you must teach them that you do not send statements. Business 101: Always inform before you perform - no surprises!
In most practices, these are common payment options:
- Payment in full prior to beginning procedures allowing a discount. Check or cash - you will be surprised at how much cash is around (home equity loans, whole life insurance).
- Payment in full at the time of service (for that day`s visit).
- Everybody offers all types of credit cards. Some patients use them for small amounts, but rarely place large amounts on their cards.
- Develop your own credit card with a local bank (a dental card).
The companies listed in Figure 2 are available to help patients receive the care they need. These companies allow monthly payments that fit most budgets. They allow six months interest-free.
If you wish, patients can go 12 months interest-free (with a little more discount upfront). Develop a generic credit application. Seek credit approval before case presentation, while the patient is going through the exam process.
You may seek $2,500 credit or more from two or three companies, prior to knowing what dentistry the patient may need. You can have credit in advance.
If these companies tell you the patient has poor credit or they deny credit, why would any doctor want to personally loan the money? But they do it everyday. This process may seem like a lot of trouble, but will become a valued routine.
If you keep on doing what you`ve always done, you will keep on getting what you always get. There are many ways to keep money off your books and in your account, working for you.
There should never be a cash-flow problem with good business management.
Don`t allow insurance to drain you, either - file electronically and get your money within two weeks. Allow your patients to pay their portion in ways other than you loaning them money. Sending statements and hoping you get paid on time is not acceptable today.
Many of you will read this and continue doing what you have always done.
Change is difficult. Change is inevitable; growth is optional. If you continue sending statements and loaning money, then at least charge interest for your loan. Do exactly what the credit card companies do - add 18 percent interest, charge $25 when payment is late, have follow-up calls until 9 p.m., and send letters when payments are 10 days late.
People who owe you money do not return for check-ups, break more appointments, and never seem to be happy with you or your staff.
Remember: If somebody is already doing it ... it must be possible!
Steps To Building Rapport and Trust
STEP 1 - Proper greeting of patient
STEP 2 - Introduction into practice
STEP 3 - Assessing patient`s "felt needs"
STEP 4 - Permission to do complete exams and inform patient of findings
STEP 5 = Proper presentation of findings
STEP 6 = Financial arrangements
Norwest Call local branch
Care Credit (800) 839-9078
Med Cash (800) 800-5810
Healthcare Creditline (800) 489-3279
Helpcard (800) 945-HELP
Dental Fee Plan (DFP) (877) 337-7526